Based on that, you might think that we no longer need patent reform. But you'd be wrong. Patent trolls are regrouping and fighting back. Despite the big drop in patent lawsuits following the Alice ruling, patent trolls have come up with some new ideas, and have recently ramped up the filing of new trolling lawsuits at a rapid pace. And there have even been a few victories. While the dollar amounts were relatively low (especially compared to what was asked for), a troll who claimed to have a patent over Bluetooth 2.0 (despite "inventing" it years after Bluetooth 2.0 was on the market) was awarded $15.7 million, and the world's biggest patent troll, Intellectual Ventures actually won a case against Symantec (but got "only" $17 million).

But, earlier this week, there was the big one. A pure patent troll, Smartflash, with a collection of vague and broad patents (US 7,334,720, US 8,118,221 and 8,336,772 -- all for "data storage and access systems") has been awarded $532,900,000 from Apple, despite everyone happily admitting that Apple came up with the idea on its own. Here's the East Texas (of course) court jury form:

And, yes, Apple could probably pay that off with the spare change falling off the edge of Tim Cook's desk, but that's not really the point. Rulings like this don't seem to create any value towards actual innovation. Smartflash once had a product, but it failed in the marketplace over a decade ago. Apple built a product that people actually wanted. Shouldn't we be rewarding the people who actually make the things people want, rather than subsidizing failure by the successful?

Smartflash's lawyer told Ars Technica's Joe Mullin that this ruling is actually a "great example of why the patent system exists." Actually, it's a great example of how screwed up the patent system is. The lawyer also spewed this load of bullshit:

The thing about a patent is—let's say you have a university professor who spent two years researching something. It's irrelevant the effort that [an infringing company] spent to build it. It's the person who came up with it first. That's the way the Constitution, and the patent laws, are written. It's designed to cause people to spend money and time innovating. The patent office publishes it, so that advances the state of the art. In exchange for that, you get a property right.

That's also not how the Constitution is written, though it is (unfortunately) how patent laws are written. But that's not a way to get people to spend "money and time innovating" because the actual innovators here -- Apple -- had to pay out to the guy who failed in innovating. Being "first" isn't innovating. Building the product someone wants is.

Either way, Apple will appeal this ruling (and those other rulings are likely to be appealed as well). And in the last few months, CAFC has actually been shown to have gotten the message about problems with its previous interpretation of patent law. But, in the meantime, we still need serious patent reform.

Vice president and Chief Internet Evangelist for Google. He is responsible for identifying new enabling technologies and applications on the Internet and other platforms for the company.

That suggests someone whose main job is to look forward, rather than back, and with a certain optimism too. But an article in the Guardian reports on a speech he gave in which he is not only concerned with the past of online technologies, rather than their future, but is also issuing an important warning about their fatal flaws:

Humanity's first steps into the digital world could be lost to future historians, Vint Cerf told the American Association for the Advancement of Science's annual meeting in San Jose, California, warning that we faced a "forgotten generation, or even a forgotten century" through what he called "bit rot", where old computer files become useless junk.

Of course, he's not the first person to raise that issue -- Techdirt wrote about this recently -- but Cerf's important contributions to the creation of the Internet, and his current role at Google, lend particular weight to his warning. That said, the Guardian article seems to miss the central reason all this is happening. It's not that it's really hard to create emulators to run old programs or open old files. The real issue is tucked away right at the end of the article, which quotes Cerf as saying:

"the rights of preservation might need to be incorporated into our thinking about things like copyright and patents and licensing. We're talking about preserving them for hundreds to thousands of years," said Cerf.

The main obstacles to creating software that can run old programs, read old file formats, or preserve old webpages, are patents and copyright. Patents stop people creating emulators, because clean-room implementations that avoid legal problems are just too difficult and expensive to carry out for academic archives to contemplate. At least patents expire relatively quickly, freeing up obsolete technology for reimplementation. Copyright, by contrast, keeps getting extended around the world, which means that libraries would probably be unwilling to make backup copies of digital artefacts unless the law was quite clear that they could -- and in many countries, it isn't.

Once again, we see that far from promoting and preserving culture, intellectual monopolies like patents and copyright represent massive impediments that may, as Cerf warns, result in vast swathes of our digital culture simply being lost forever.

Permalink | Comments | Email This Story
]]>and-he-should-knowhttps://www.techdirt.com/comment_rss.php?sid=20150213/07470230016Wed, 18 Feb 2015 08:10:14 PSTElon Musk Clarifies That Tesla's Patents Really Are Free; Investor Absolutely Freaks OutMike Masnickhttps://www.techdirt.com/articles/20150217/06182930052/elon-musk-clarifies-that-teslas-patents-really-are-free-investor-absolutely-freaks-out.shtml
https://www.techdirt.com/articles/20150217/06182930052/elon-musk-clarifies-that-teslas-patents-really-are-free-investor-absolutely-freaks-out.shtmlopen up all of Tesla's patents, with a promise not to sue anyone for using them. We also found it funny when some reacted to it by complaining that it wasn't done for "altruistic" reasons, but to help Tesla, because of course: that's the whole point. Musk recognized that patents frequently hold back and limit innovation, especially around core infrastructure. Since then, Musk has said that, in fact, rivals are making use of his patents, even as GM insists it's not.

However, as some may recall, when Musk made the original announcement, the terms of freeing up the patents were at least a little vague. It said that Tesla "will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology." That "in good faith" claim had a few scratching their heads, and pointing out that still gave Tesla an out. We were a little disappointed that the company didn't make the terms entirely clear, believing that the "in good faith" line would likely scare away some companies from actually using the patents. However, recently, at the Detroit Auto Show, when questioned about this, Musk clarified that he really meant to make them completely free for anyone to use, no questions asked, no licensing discussions needed:

Around the three-minute mark someone asks how many automakers have taken Tesla up on the offer to use its patents, and Musk notes:

Musk: We actually don't require any formal discussions. So they can just go ahead and use them.

Reporter: Is there a licensing process?

Musk: No. You just use them. Which I think is better because then we don't need to get into any kind of discussions or whatever. So we don't know. I think you'll see it in the cars that come out, should they choose to use them.

In other words, Musk is saying what most of us assumed all along was the point. Hoarding the patents and blocking others doesn't help him at all. Letting others expand the market does. And licensing discussions are unnecessary friction and a waste of time.

All good, right?

Well, no. It appears that clueless Wall Street types are absolutely flipping out over this (possible registration wall). Some outfit called "Technology Equity Strategies," which doesn't seem to understand the first thing about how innovation actually works, posted an insanely long and ridiculously misguided note on how this is horrifying for anyone invested in Tesla. The descriptions are hilarious, where you can almost hear these Wall Street types pulling out their hair over this idea of *gasp* actually letting others use Tesla's patents. First, it notes that Musk called them "open source" patents, and spends way too much time detailing the "official" definition of open source, and then says that the patents are now "public domain" (apparently not recognizing that public domain and open source are not the same thing -- though in this case it might not matter). Technology Equity Strategies is very upset about this.

The restrictions in the June 12 blog of "good faith" and "we will not initiate" are over with. They are finished. These patents are either in the public domain, or they have at minimum been rendered unenforceable against all users, "good faith" or not.

Why? Because in their non-innovation minds, all they care about is how do you best value the stock, and giving up patents is giving up an asset. The note first (mistakenly) argues that many areas of the tech industry rely on patents as barriers to entry and that's where their advantage comes in (rather than execution, which is the truth). And so, it thinks now some other company will just come in and eat Tesla's lunch:

Is it possible that the massive capital and labor needed to attain leadership might not be eroded in by imitators in Asia, by large companies with resources to buy market share, by companies whose strengths are manufacturing process, global footprint and scale?

If so, the embedded option on a leader in a new niche in the auto industry and on a shift in the competitive dynamics in the auto industry might indeed be a valuable option.

But Mr. Musk was not interested in that. He is happy to give away the advantages that actually provide great profitability in some sectors of technology. He wants to compete as an auto company, in the brutal and capital intensive way that auto companies compete. More fundamentally, he is willing to eliminate the possibility in the future of competing as a technology company, which depend on the IP protections of patents, copyright, and trade secrets.

Of course, the reality is that Musk recognizes what many in this sector recognize: that sharing the ideas helps speed along innovation, creating greater and greater opportunities, which you can realize by executing well. Musk is confident in Tesla's ability to execute and (as we noted earlier) recognizes that sharing the patents actually helps Tesla by getting more electric vehicles on the market, meaning more overall infrastructure that makes Tesla cars more valuable.

This is the ridiculousness of Wall Street: sometimes it simply can't understand the nature of a non-zero sum game. Giving up any "advantage" is seen as helping others, without recognizing that helping others can also help you out tremendously. Instead, these investor types believe in the myth of intellectual property, that it's patents that make a company valuable:

Intellectual property is an important foundation for valuation technology companies. Funds that own Tesla may not be the same institutions who own GM or Ford, but many will be familiar with Qualcomm and ARM.

IP goes a long way in explaining why Qualcomm has a market cap of $110 billion, and ARM has a valuation of 23 billion (18x trailing revenues) while Nokia and Dell were sold for less than two times revenues. Nokia and Dell did fine work for a while as manufacturers and product companies. There was a time when they too looked like winners based on product execution. But they didn't own core IP, and so when product cycles shifted, they were left with little value.

Yes, ARM and Qualcomm are both patent-focused companies (that dip their toes into trolling all too often). And, yes, companies that don't execute well can lose out in the end, but cherry picking a few companies that have flopped on execution, while pointing to a few trollish companies as success stories, doesn't make a very strong argument. It's basically saying "yes, invest in the companies that don't believe in their own ability to execute, who have a fallback as a patent troll." That's not exactly a strong endorsement. Tesla believes in its own ability to innovate -- and these Wall Street guys think that's a bad thing.

And then there's the rewriting of history:

Let's look at Apple. Apple and Steve Jobs learned the hard way. Some of us will recall that an early Apple (believing that IP wasn't important) opened up its IP to the basic Mac interface with a royalty free license to Microsoft.

This resulted in Microsoft Windows taking nearly the entire PC market from Apple, and nearly bankrupting Apple. In his second chance, Steve Jobs learned about the importance of IP. This is a lesson that Mr. Musk failed to absorb.

Except, that's totally incorrect. While Apple had licensed a few aspects of its UI, that licensing agreement became meaningless by the time of Windows 2.0. Then Apple sued Microsoft and lost, because it was trying to use copyright law to claim things that could not be covered by copyright law. And that's not why the PC took over the market. So this isn't a lesson that Musk failed to absorb, because it never happened.

The Grand Gesture shows the worrisome sincerity in Musk's repeated statements that he is primarily on a mission to get other companies to sell a lot of electric vehicles, not to make money.

A worrisome sincerity? No, it's showing that Musk recognizes that if the market for electric vehicles does not grow massively, then he won't make money. He very much wants to make money, and a good way to do that is to build out the overall market for EVs, allowing Tesla to thrive. And these Wall Street folks first mock the idea that Musk might first invest to grow the market, by then... claiming that Asian makers might do the same thing:

No doubt Mr. Musk believes that if the industry embraces EVs, then Tesla will succeed as part of it. But is this plausible, that everything will just work out for the best. Is it plausible that Musk can succeed as a manufacturer in the U.S. competing against manufacturers in Asia who may take zero margins to grow a business, using Musk's proven designs? U.S. companies have learned over and over that IP is necessary to get a sustained profitable return on their innovations.

Actually, no. Plenty of tech companies don't think that IP is "necessary" to get sustained returns -- they think the opposite. Patents get in the way of profitability. They require lots of lawyer time and threats of lawsuits.

Frankly, Tesla opening up its patents seems like a move that shows how confident it is in its execution abilities, and makes the company a lot less likely to rest on its laurels and become nothing but a "licensing" company down the road. The fact that people who don't understand what a mess patents are and how they slow down innovation are now jumping in making ridiculous claims like Tesla's decision is why Apple can now jump into the EV car market just shows how little some people understand patents. The "myth" of patents as a powerful tool of innovation is still out there, and that's a shame.

Permalink | Comments | Email This Story
]]>silly investorshttps://www.techdirt.com/comment_rss.php?sid=20150217/06182930052Fri, 13 Feb 2015 15:44:41 PSTMyriad Genetics Finally Gives Up Its Gene Patent Fight... Just As The Patent Office Opens The Doors Up To More Gene PatentsMike Masnickhttps://www.techdirt.com/articles/20150212/18044330012/myriad-genetics-finally-gives-up-its-gene-patent-fight-just-as-patent-office-opens-doors-up-to-more-gene-patents.shtml
https://www.techdirt.com/articles/20150212/18044330012/myriad-genetics-finally-gives-up-its-gene-patent-fight-just-as-patent-office-opens-doors-up-to-more-gene-patents.shtmlMyriad Genetics, the biotech company that has a test for the BRCA1 and BRCA2 genes (often an indicator of a higher risk for breast cancer). The company argued that because of its patent on those genes, no one else could test for those genes. Back in 2013, the Supreme Court did the right thing and finally rejected the concept of gene patents, despite years of the USPTO granting such patents. As the court noted, allowing gene patents created a perverse situation in which a single company could have the exclusive right to isolate a person's own genes -- and that's just not right.

But Myriad Genetics did not give up easily. Just a month after the Supreme Court ruling it sued a bunch of competitors over a different set of gene patents, insisting that the Supreme Court had really only struck down the two in question. Those lawsuits did not go well, as Myriad lost again and again. At this point, it's only choice was to go back to the Supreme Court, where it was obviously going to get a pretty big smackdown -- so Myriad has now admitted that it will not pursue an appeal effectively ending this latest round of cases (after costing those other testing centers tons of money to defend themselves).

As the ACLU notes, this news is great, but there's also some bad news. Just as Myriad is finally coming to terms with what the Supreme Court actually said a year and a half ago, the US Patent and Trademark is quietly opening the door back up to gene patents:

In response to severe criticism by industry groups, patentholders, and patent attorneys, the Patent Office issued new guidance in December that watered down the standard for determining whether something is an unpatentable product of nature. It said that differences in structure or function could allow companies to patent things based in nature. Under this test, if a surgeon removed a kidney from one's body in order to transplant it, the surgeon could argue that she should be able to patent it because it no longer has the same structure as in the body since its blood vessels were cut. The kidney, of course, would be intended to function just as it has prior to being removed in the body that receives it.

The Supreme Court has long rejected this view. For example, in 1931 the court said that a fruit treated with a preservative in its rind could not be patented, because while it has a different structure, its uses are still the same – to be eaten. The applicant could have sought a patent on a new preservative it developed, but not on the fruit itself.

In other words, the ugly head of gene patents may be about to come back alive, despite the Supreme Court killing it off a couple years ago. However, there's still a chance the USPTO will reconsider:

The public has an opportunity to weigh in on this latest guidance. The Patent Office is seeking comments until March 16. In its next revision of the guidance, the Patent Office must require differences in both structure and function when assessing patent applications. Otherwise, the public will bear the consequences when another company, like Myriad, wields its exclusive rights on nature to stall medical and scientific advancement.

Permalink | Comments | Email This Story
]]>some-good,-some-badhttps://www.techdirt.com/comment_rss.php?sid=20150212/18044330012Tue, 10 Feb 2015 21:14:03 PSTStudy Confirms That Revealing Secrets, Rather Than Hoarding Info, Is Good For InventorsMike Masnickhttps://www.techdirt.com/articles/20150203/16551429899/study-confirms-that-revealing-secrets-rather-than-hoarding-info-is-good-inventors.shtml
https://www.techdirt.com/articles/20150203/16551429899/study-confirms-that-revealing-secrets-rather-than-hoarding-info-is-good-inventors.shtmlsciamiko points us to an interesting study done by Stuart Graham, who was the first chief economist of the US Patent Office (we were initially excited about his hiring, though the only other time we reported on his work, it was to wonder why a paper hid his connection to the USPTO), looking at whether or not inventors choose to reveal the "secrets" of their invention prior to actually getting the patent. Graham and his co-author, Deepak Hegde, examined what happened after the American Inventors Protection Act (AIPA) went into effect in 2000. Part of the AIPA was that the USPTO would publish patent applications after 18 months (usually well before the patents were approved or rejected) -- rather than only making them public after they were approved. The usual suspects (patent hoarders and self-described "small inventors") screamed like crazy about how this would completely destroy American innovation, because they'd have to reveal their secrets too early. To try to appease these concerns, the bill included a loophole: patent applications could be kept secret if they didn't file for foreign patent protection -- which was the case for about half of all US patents.

That gave Graham and Hegde a nice dataset to look at, to see who chose to keep their patent applications secret until approval, and who let those applications be revealed. If those who freaked out about the publication requirement were right, it should be clear in the data that, when given the chance, businesses kept their patents secret, and the "secret" patent applications should be worth more than the non-secret ones. The reality? The exact opposite was true. Inventors chose to reveal their patent applications readily, even when they had the option of withholding them, and the more valuable patents tended to be the ones that were revealed:

They examined 1.8 million granted patents filed at the USPTO from 1995 to 2005 and analyzed the disclosure preferences of the inventors. Their analysis found that, among those not seeking foreign protection, about 85 percent of inventors filing a patent since 2000 chose to disclose information about their patents prior to their approval.

"Overwhelmingly, those inventors patenting only in the U.S. are choosing 18 month disclosure," co-author Hegde said.

And the study appears to show that the complaints and worries of those small inventors about this increased transparency was, in fact, complete bunk:

When the AIPA was passed, one of the biggest complaints was that the publication requirement would hurt U.S. small inventors, but the researchers found that individuals and small companies still opted for disclosure during the study period.

"Small U.S. inventors are not choosing the secrecy route," Graham said. "When they patent only in the U.S., they are choosing secrecy in only about 15 percent of the cases, not statistically different than the rate among all other types of inventors."

Another major complaint of the AIPA was that disclosing patent secrets would stop the engine of innovation in the United States and that society would get less meaningful inventions. Contrary to these arguments, the researchers found that patents born out of secrecy were overall less valuable than those that opted for disclosure.

"When we examine indicators of patent value, we find consistent evidence that the least-valuable and least-impactful patents are those that opted for pre-grant secrecy," Hegde said.

This isn't particularly surprising to us -- as, contrary to the way some think, we've pointed out for years that hoarding information tends to limit innovation, while sharing it is likely to lead to greater innovation. Of course, it's the same "small inventors" who insisted the sky was falling over the AIPA who are now protesting the latest attempt at patent reform, making similar claims about how it will drive down quality and drive inventors out of business. They were totally wrong last time, and it's likely they're totally wrong again.

Permalink | Comments | Email This Story
]]>shocking-not-shockinghttps://www.techdirt.com/comment_rss.php?sid=20150203/16551429899Fri, 6 Feb 2015 15:39:12 PSTOnce More With Feeling: Patent Reform Introduced, And This Time The Trial Lawyers May Not Be Able To Kill ItMike Masnickhttps://www.techdirt.com/articles/20150206/14164129939/once-more-with-feeling-patent-reform-introduced-this-time-trial-lawyers-may-not-be-able-to-kill-it.shtml
https://www.techdirt.com/articles/20150206/14164129939/once-more-with-feeling-patent-reform-introduced-this-time-trial-lawyers-may-not-be-able-to-kill-it.shtmlofficially re-introduced his patent reform bill, which largely mirrors the one that sailed through the House with ease a little over a year ago (in part because they took out some of the key parts). The Senate bill was a bit stronger and was on the verge of passing until the trial lawyers called up Senator Harry Reid, and had him flat out kill the bill, despite widespread bipartisan support. As we noted at the time, it seemed like the trial lawyers may have miscalculated, because it was already clear that the Republicans were likely to gain control over the Senate in the 2014 elections (as they did), and they were not interested in bowing down to the trial lawyers.

Hopefully that means that a decent patent reform bill will actually make it through Congress this time around, but it still seems likely that, while it may help around the edges, the final bill probably won't be strong enough to fully solve the problems. Still, it's a good step forward, and at the very least, in clearing out some of the problems with the current system (often highlighted via trollish behavior) it will shine the light on remaining problems in the system.

Permalink | Comments | Email This Story
]]>will-it-make-a-differencehttps://www.techdirt.com/comment_rss.php?sid=20150206/14164129939Mon, 2 Feb 2015 06:03:10 PSTPatents Become A Literal 'Get Out Of Jail Early' Card For Chinese PrisonersGlyn Moodyhttps://www.techdirt.com/articles/20150121/09453029771/patents-become-get-out-jail-early-card-chinese-prisoners.shtml
https://www.techdirt.com/articles/20150121/09453029771/patents-become-get-out-jail-early-card-chinese-prisoners.shtml
We've written before about China's keenness to boost the number of patents granted -- without worrying too much about their quality. The New York Times reports on a rather unusual scheme for adding to the country's patent pile:

Under Chinese law, prisoners who have come up with useful new technologies can be eligible for sentence reductions.

This is no mere theoretical option: some prisoners have already benefited from the system.

Mr. Nan, who was given a 10-and-a-half-year sentence for corruption and match fixing in 2012, saw a court take one year off his sentence in December for good behavior, including writing science fiction and receiving four patents, China Daily reported. His inventions included a device for controlling desktop monitors, a mobile phone stand and two soccer-related items: a portable goal and a tool for measuring shot accuracy, China Daily said.

The Chinese newspaper that broke the story about prisoners using patents to reduce their sentences, Beijing Youth Daily, also found services that claimed they could provide patents to be used in this way:

One office in Shaanxi Province said it could provide a simple patent for 6,800 renminbi, or about $1,100, with prices rising to nearly $10,000 for more complex patents.

The good news is that if the people running these services are ever caught and sent to prison for trying to game the system, at least they know a good way of getting out early.

Permalink | Comments | Email This Story
]]>gaming-the-systemhttps://www.techdirt.com/comment_rss.php?sid=20150121/09453029771Wed, 28 Jan 2015 01:10:08 PSTKey Hepatitis C Patent Rejected In India, Clearing Way For Generic Treatment Costing A Thousand Times Less Than US PriceGlyn Moodyhttps://www.techdirt.com/articles/20150115/07520129706/key-hepatitis-c-patent-rejected-india-clearing-way-generic-treatment-costing-thousand-times-less-than-us-price.shtml
https://www.techdirt.com/articles/20150115/07520129706/key-hepatitis-c-patent-rejected-india-clearing-way-generic-treatment-costing-thousand-times-less-than-us-price.shtmlIndia has a long and complicated relationship with patents, but more recently, it has established itself as the leading "pharmacy of the developing world," thanks to its generic drug manufacturers which are able to supply key medicines at affordable prices. A recent patent decision, reported here by Intellectual Property Watch, continues that tradition:

Today's rejection by the Patent Office Controller of India of a patent application by Gilead company for a key drug against hepatitis C is being hailed by advocates as a path to dramatically lower costs of treatment for the disease. Hepatitis C has made news for the emergence of exorbitantly priced medicines over the past year.

The oral drug, which first received regulatory approval in the US in November 2013, and has been priced by Gilead at US$84,000 for a treatment course, or $1,000 per pill in the US, has caused a worldwide debate on the pricing of patented medicines. A study from Liverpool University showed that sofosbuvir could be produced for as little as $101 for a three-month treatment course.

That gives an idea of the kind of profit margin involved -- rather excessive even allowing for generous research and development costs. But as well as being good news for those who will soon be able to afford this drug, the judgment is also significant for its underlying reasoning, as Intellectual Property Watch notes:

A look at the decision shows that a provision in India's law continues to stop patent applications if they fail to show sufficient novelty and inventive step -- and are subject to opposition.

That's important because it confirms that India is still taking a very strict approach to granting pharma patents, which must meet stringent conditions of novelty and inventiveness. Millions of people in the developing world who stand to benefit from India's low-cost generics will be grateful, while some in the West may be less happy.

Permalink | Comments | Email This Story
]]>rather-exorbitanthttps://www.techdirt.com/comment_rss.php?sid=20150115/07520129706Thu, 22 Jan 2015 15:39:00 PSTSupreme Court Smacks Down CAFC Yet Again: But This Time It May Help The Patent TrollsMike Masnickhttps://www.techdirt.com/articles/20150121/17472829773/supreme-court-smacks-down-cafc-yet-again-this-time-it-may-help-patent-trolls.shtml
https://www.techdirt.com/articles/20150121/17472829773/supreme-court-smacks-down-cafc-yet-again-this-time-it-may-help-patent-trolls.shtmlanother smackdown of CAFC, the Appeals Court for the Federal Circuit that handles all patent appeals. This regular smackdown of CAFC by the Supreme Court has become such a recurring story that it would almost be surprising if the Supreme Court took a patent case to do anything but smackdown CAFC. The key issue here is that the Supreme Court basically has taken away CAFC's powers to review a patent directly to determine if the patent itself is valid or not. Instead, it can only review the district court's findings, to determine if there was an obvious error by those district courts in handling claim construction. While this takes away power from CAFC, it actually is seen as beneficial to patent trolls, since (especially lately), the now-chastened CAFC has suddenly been rejecting patents left and right. But that might stop now as the CAFC's ability to do that is now greatly limited.

The specific case is Teva Pharmaceuticals v. Sandoz, and the 7-2 ruling argues that appeals courts are only supposed to set aside "clearly erroneous" findings of fact by the district court, and that means that the CAFC should not do "de novo" review of a patent (i.e., from scratch):

Federal Rule of Civil Procedure 52(a)(6) states that a court of appeals “must not . . . set aside” a district court’s “[f]indings of fact” unless they are “clearly erroneous.” In our view, this rule and the standard it sets forth must apply when a court of appeals reviews a district court’s resolution of subsidiary factual matters made in the course of its construction of a patent claim....

Even if exceptions to the Rule were permissible, we cannot find any convincing ground for creating an exception to that Rule here. The Rules Advisory Committee pointed out that, in general, exceptions “would tend to undermine the legitimacy of the district courts . . . , multiply appeals . . . , and needlessly reallocate judicial authority.”

The ruling further notes that the CAFC can still do "de novo review" of the lower court's "ultimate interpretation of the patent claims," but just not the fact finding portion. Still, where this is concerning is that, for all the problems with CAFC judges generally loving patents, district court judges are unlikely to have much understanding of the underlying issues that go into a patent. And thus, the fact finding part of the process will just involve piling on experts, and the side willing to spend more on experts who will claim its interpretation of the claims is right will win, and the CAFC can no longer do much to challenge that.

Unlike recent CAFC smackdowns that were of the 9-0 variety, this one had two dissenting Justices: Thomas and Alito. Their dissent is a worthwhile read also. And it focuses on the somewhat fuzzy area in between what is a finding of fact and one of law. And it notes that patents are not that different from laws, and as such the claim construction aspect shouldn't be seen so much as a finding of fact as a finding of law. Specifically, a patent is effectively a law against others being able to use a certain invention. And thus, according to the dissent, it should be treated like a law, subject to specific interpretations that can be reviewed by the appeals court:

Because they are governmental dispositions and provide rules that bind the public at large, patent claims resemble statutes. The scope of a patent holder’s monopoly right is defined by claims legally actualized through the procedures established by Congress pursuant to its patent power. Thus, a patent holder’s actual intentions have effect only to the extent that they are expressed in the public record....

Moreover, because the ultimate meaning of a patent claim, like the ultimate meaning of a statute, binds thepublic at large, it should not depend on the specific evidence presented in a particular infringement case. Although the party presentations shape even statutory construction, de novo review on appeal helps to ensure that the construction is not skewed by the specific evidence presented in a given case.

Furthermore, the dissent reasonably worries that this will now open up a huge opportunity for patent trolls to argue where the line is between fact and law, creating quite a bit of new litigation:

Perhaps the majority is correct that “subsidiary factfinding is unlikely to loom large in the universe of litigated claim construction.” .... But I doubt it. If this case proves anything, it is that the line between fact and law is an uncertain one—made all the more uncertain by the majority’s failure to identify sound principles for the lines it draws. The majority’s rule provides litigants who prevail in district court a significant opportunity and incentive to take advantage of this uncertainty by arguing on appeal that the district court’s claim construction involved subsidiary findings of fact. At best, today’s holding will spawn costly—and, if the majority is correct about the frequency with which these evidentiary determinations make a difference, meritless—collateral litigation over the line between law and fact. We generally avoid any rule of judicial administration that “results in a substantial expenditure of scarce judicial resources on difficult questions that have no effect on the outcome of the case,” ..., and there is no reason to embrace one here.

So while it's not surprising that CAFC received another Supreme Court smackdown, it seems like perhaps this time, it may create more problems, rather than cleaning up a mess.

Permalink | Comments | Email This Story
]]>not-necessarily-good-newshttps://www.techdirt.com/comment_rss.php?sid=20150121/17472829773Wed, 7 Jan 2015 21:07:15 PSTToyota Joins Tesla In Freeing A Bunch Of Key PatentsMike Masnickhttps://www.techdirt.com/blog/innovation/articles/20150106/18292229617/toyota-joins-tesla-freeing-bunch-key-patents.shtml
https://www.techdirt.com/blog/innovation/articles/20150106/18292229617/toyota-joins-tesla-freeing-bunch-key-patents.shtmlfreeing up Tesla's patents, hoping to jumpstart the market for electric cars. As we pointed out at the time, this highlighted how patents can, and often do, hold back innovation -- and we hoped that others might take notice. It's taken a while, but at CES this week, Toyota also announced plans to free patents, focusing on the 5,680 patents (including pending patents) it has on fuel cell drive systems. The details still matter, but Toyota says that the patents are all available, "royalty free." The patents seem to cover the whole stack of things necessary to develop hydrogen fuel cell cars -- including the patents for hydrogen stations.

Of course, the idea, as with Tesla, is that the market needs to be jumpstarted, and that means a lot of companies working together to help build the infrastructure and educate the market. That's done best by sharing the information and letting everyone compete on the actual execution. But, of course, that's what we've been arguing should be the case for lots of technology areas as well. The patents are only serving to hold back so many markets, not allowing companies to build the best possible products they can, and thus limiting overall innovation and adoption.

Hopefully more companies -- and not just automakers -- will start to recognize why this is such a good idea, not just for their own business, but for innovation in general.

Permalink | Comments | Email This Story
]]>good-for-innovationhttps://www.techdirt.com/comment_rss.php?sid=20150106/18292229617Wed, 7 Jan 2015 08:09:50 PSTThe Nasty Patent Games Drug Companies Play To Stop You From Getting Cheaper DrugsMike Masnickhttps://www.techdirt.com/articles/20141225/06374929525/nasty-patent-games-drug-companies-play-to-stop-you-getting-cheaper-drugs.shtml
https://www.techdirt.com/articles/20141225/06374929525/nasty-patent-games-drug-companies-play-to-stop-you-getting-cheaper-drugs.shtml"Worth" -- which included a few different stories trying to establish how much something is truly "worth." The first story in the collection talked about how much extra time in life is worth, as part of a discussion on whether or not it's reasonable for certain drugs to be priced insanely high. It was an interesting discussion, mostly revolving around the question of whether it's "worth" paying tends of thousands of dollars for a drug treatment that might only extend your life a few weeks. There is just a brief discussion about whether or not it's appropriate for pharmaceutical companies to charge the rates that they do -- with the Radiolab team unfortunately accepting the tired (and incredibly misleading) claim from a drug company that because drug research includes so many failures, it needs to charge these ridiculous high rates to make up for all the failures.

This is misleading in all sorts of ways, though that will need to be the subject of another post at another time. My biggest complaint, after the story was over, was that it failed in economics 101. It stuck with the premise that there was a quantifiable single amount that something was "worth" -- and that price is a reflection of that. This is something that many people tend to feel, instinctively, but it's not accurate. The value of something is different to different people and depends on many factors. The price of something may be quite different than the value -- again, something we've been highlighting for years.

Here's the key bit: the price of something is driven by supply and demand. When you -- as the program did -- look at price solely based on "value" you're only looking at the demand side of the equation, and not the supply. And that's where things get extra tricky in pharmaceutical pricing -- because the supply side is massively distorted through patents, which enable drug companies to artificially limit the supply, driving up prices to insane levels. In a normal, functioning society, we might recognize that this is a problem. Deriving pricing for healthcare solely based on demand is ludicrous, and shows a society with very short-term thinking. It prioritizes short-term narrow profits of drug companies over long-term contributions from a more healthy populace.

But this is the way of our pharmaceutical industry today. And these distortions have become something of, well, a drug to the pharma industry. They've become so fat and happy based on the monopoly rents of patents artificially limiting supply, that they can't fathom how to survive without such rents. That crutch has resulted in big pharma running into some serious problems lately -- because they haven't been discovering many really valuable new drugs lately. At the same time, many of their old drugs have seen their patents start to expire.

In response, pharmaceutical companies have been pulling out all sorts of tricks to try to extend the monopoly rents (rather than actually improving people's health or their own business model). For a while, we were discussing "pay for delay" schemes, in which big pharmaceutical companies would sue small generic drug makers... and then "settle" by paying those generic companies a bunch of cash not to compete with generic drugs for some time. That practice recently became harder after the Supreme Court said that the FTC can go after such practices as a form of antitrust enforcement.

But that's not the only game that big pharmaceutical firms have been playing. A recent lawsuit filed by New York against Forest Labs and its parent company Actavis revealed that the company was trying to force Alzheimer's patients onto a new drug, and away from one that they had been using. The only real difference in the two drugs: the length of the patent protection. Basically, the company was trying to force patients onto a drug that wasn't close to becoming available in generic forms, which would make it much, much cheaper. From the lawsuit:

This case is brought to prevent Defendants from illegally maintaining their
monopoly position and inflating their profits at the expense of patients suffering from
Alzheimer's disease. The manipulative tactic that the Defendants seek to employ here is what
some in the industry, including Defendants' own CEO, have called a "forced Switch." In a
forced switch, a pharmaceutical company that sells a drug facing imminent generic competition
withdraws its drug from the market, forcing patients to switch to a different form of the drug
with patents that expire later. The switch has the effect of impeding the entry of lower-cost
generic drugs. A physician recently complained to Defendants, aptly describing their
contemplated action as "immoral and unethical." It is also illegal.

Defendants sell a blockbuster drug to treat Alzheimer's disease, called Namenda.
Namenda is Forest's top selling drug, and is protected by patent and regulatory exclusivities that
prevent generic versions from entering the market until July 2015. But rather than allowing
patients with Alzheimer's to continue to take Namenda and switch to the less expensive generic
version when it becomes available, as contemplated by federal and state drug laws, Forest
instead hatched a scheme that interferes with patients' ability to make this switch.

Defendants' strategy is to discontinue or severely restrict patient access to its
original, immediate-release version of Namenda, known as Namenda IR, prior to generic entry in
order to force patients to switch to Forest's newer, virtually identical, extended-release version of
Namenda, called Namenda XR. Because Namenda XR is protected by patents for many years
longer than the original Namenda IR, Defendants' goal is to use the "forced switch" to reap
several more years of monopoly profits than they would have earned otherwise. Under generic
substitution laws, a pharmacist will not be able to substitute lower-priced generic Namenda IR
(known as memantine) for Namenda XR. As a result, once patients have switched to
Namenda XR, it will destroy the market for the generic form of Namenda IR because of the
dramatically increased burden, cost, and time needed to arrange for patients who have been
switched to Namenda XR to switch back to the original version.

Thankfully, a few weeks ago, an initial ruling in the case found that Actavis could not move forward with these "forced switch" plans and needed to continue making the original drug, Namenda IR, available. The full court ruling [pdf] is fairly detailed in how Actavis has a monopoly on the market for memantine and is abusing it in anti-competitive ways. The court notes that merely having a patent isn't necessarily proof of a monopoly -- but in this case, Actavis absolutely does have a monopoly. Further, it notes that just because you have a monopoly, it doesn't mean you're abusing it. But... Actavis does appear to be abusing its monopoly position. It didn't help that Forest Labs CEO, Brent Saunders (recently moved up to Actavis CEO as well), was pretty open about this:

Saunders stated, contemporaneously with the adoption
of the hard switch by Forest, that the purpose of the switch was
anticompetitive: to put barriers obstacles in the path of
producers of generic memantine and thereby protect Namenda’s
revenues from a precipitous decline following generic entry.... He further stated: “if we do the hard switch and
we’ve converted patients and caregivers to once-a-day therapy
versus twice a day, it’s very difficult for the generics then to
reverse-commute back, at least with the existing
[prescriptions]. They don’t have the sales force, they don’t
have the capabilities to go do that. It doesn’t mean that it can’t happen, it just becomes very difficult. It is an obstacle
that will allow us to, I think, again go into to a slow decline
versus a complete cliff.”).

Of course, this particular practice, of trying to force people to avoid generic competition is increasingly widespread. As I was finishing up this post, I came across a similar, if equally disturbing, story about Pfizer directly threatening doctors should they decide to prescribe generic versions of pregabalin, an anti-epilepsy drug, that will also go off patent in 2015. But here's the tricky part: Pfizer holds a different patent on the same drug if it's used to treat pain (rather than epilepsy). Pfizer is claiming that prescribing the generic version for pain use would lead to serious problems -- even though it's the same damn drug.

You will see that, whilst the basic patent for pregabalin has expired and regulatory data protection for Lyrica expired in July 2014, Pfizer has a second medical use patent protecting pregabalin's use in pain which extends to July 2017. Pfizer conducted further research and development on pregabalin leading to the invention of its use in pain and hence was granted a second medical use patent for this indication. This patent does not extend to pregabalin's other indications for generalized anxiety disorder (GAD) or epilepsy.

As a result of the pain patent, we expect that generic manufacturers will only seek authorisation of their pregabalin products for use in epilepsy and generalised anxiety disorder and not for pain, whilst Pfizer's pain patent is in place. Generic pregabalin products therefore are expected not to have the relevant information regarding the use of the product in pain in the PIL (Patient Information Leaflet) and SmPC (Summary of Product Characteristics). In other words, the generic pregabalin products are expected to carry so-called "skinny labels" and will not be licensed for use in pain. In the circumstances described above, Pfizer believes the supply of generic pregabalin for use in the treatment of pain whilst the pain patent remains in force in the UK would infringe Pfizer's patent rights. This would not be the case with supply or dispensing of generic pregabalin for the non-pain indications, but we believe it is incumbent on those involved to ensure that skinny labeled generic products are not dispensed and used for pain.

In this regard, we believe the patent may be infringed, even potentially unwittingly, by pharmacists and others in the supply chain, if they supply generic pregabalin for the pain indication. Without information, guidance and practical solutions from the authorities, Pfizer believes that multiple stakeholders, possibly without realizing, may contribute to patent infringement which would be an unlawful act. This runs contrary to the government's established policy of rewarding additional research by the granting of a second medical use patent.

As Cory Doctorow notes in the article above, Pfizer here seems to be trying to take its own "stupid problem" and make it everyone else's stupid problem:

Weirder still is that Pfizer wants to make their stupid problem into everyone else's stupid problem. The fact that it's hard to enforce this kind of secondary patent is Pfizer's business, not doctors'. Doctors' duty is to science and health, not Pfizer's profit-margins. Scientifically, there's no difference between the two compounds. Doctors who prescribe generics leave their patients (or possibly the NHS) with more money to pursue their other health goals.

If your dumb government monopoly is hard to enforce, maybe you shouldn't be banking on it. But in the world of corporatist sociopathy, where externalising your costs on others isn't just a good idea, it's your fiduciary duty to your shareholders, Pfizer's actions are practically inevitable.

And this brings us back to the problem discussed at the very top of this article. The entire pharmaceutical industry has built its business around the idea of artificially reducing supply -- rather than about providing more benefit (health). That's really screwed up. A good business focuses on expanding the benefit to users, not limiting it to charge more. Our patent policy has created incentives for exactly the opposite -- and that is having a massive impact on the health and well-being of people around the globe.

Permalink | Comments | Email This Story
]]>the-evilness-of-drug-companieshttps://www.techdirt.com/comment_rss.php?sid=20141225/06374929525Wed, 7 Jan 2015 01:00:07 PSTHow 'Gongkai' Innovation Could Allow China To Leapfrog The WestGlyn Moodyhttps://www.techdirt.com/blog/innovation/articles/20141230/09362929550/how-gongkai-innovation-could-allow-china-to-leapfrog-west.shtml
https://www.techdirt.com/blog/innovation/articles/20141230/09362929550/how-gongkai-innovation-could-allow-china-to-leapfrog-west.shtml
Back in 2011, we wrote about the fascinating culture of "shanzhai" production -- Chinese companies manufacturing counterfeit goods that ignore intellectual monopolies like patents. The post drew on insights from the open hardware hacker Andrew "bunnie" Huang, who has been following this world closely, drawing on his first-hand experiences of visiting and using shanzhai companies. In 2013, Huang gave the shanzhai approach to sharing -- like open source, but not quite -- a name: "gongkai". In a long and fascinating new post, he explains the background to the term:

["Gongkai"] is deliberately not the Chinese word for "Open Source", because that word (kaiyuan) refers to openness in a Western-style IP framework, which this not. Gongkai is more a reference to the fact that copyrighted documents, sometimes labeled "confidential" and "proprietary", are made known to the public and shared overtly, but not necessarily according to the letter of the law. However, this copying isn't a one-way flow of value, as it would be in the case of copied movies or music. Rather, these documents are the knowledge base needed to build a phone using the copyright owner's chips, and as such, this sharing of documents helps to promote the sales of their chips. There is ultimately, if you will, a quid-pro-quo between the copyright holders and the copiers.

This contrasts with the Western approach, where explicit permission to use every patented invention or extract of copyright material must be obtained in advance before progressing further. The resulting "patent thickets" and copyright analogs are a growing problem for complex digital products that depend on multiple technologies built out of small incremental advances, most of which are patented, and which therefore require separate licenses and negotiations. The more flexible gongkai approach offers an interesting alternative. Huang goes on to explore the important differences between what he calls "this fuzzy, gray relationship between companies and entrepreneurs" and the way things work with the Western system:

The West has a "broadcast" view of IP and ownership: good ideas and innovation are credited to a clearly specified set of authors or inventors, and society pays them a royalty for their initiative and good works. China has a "network" view of IP and ownership: the far-sight necessary to create good ideas and innovations is attained by standing on the shoulders of others, and as such there is a network of people who trade these ideas as favors among each other. In a system with such a loose attitude toward IP, sharing with the network is necessary as tomorrow it could be your friend standing on your shoulders, and you’ll be looking to them for favors. This is unlike the West, where rule of law enables IP to be amassed over a long period of time, creating impenetrable monopoly positions. It's good for the guys on top, but tough for the upstarts.

This "network IP" results in an elevated rate of product innovation:

Chinese entrepreneurs ... churn out new phones at an almost alarming pace. Phone models change on a seasonal basis. Entrepreneurs experiment all the time, integrating whacky features into phones, such as cigarette lighters, extra-large battery packs (that can be used to charge another phone), huge buttons (for the visually impaired), reduced buttons (to give to children as emergency-call phones), watch form factors, and so forth. This is enabled because very small teams of engineers can obtain complete design packages for working phones -- case, board, and firmware -- allowing them to fork the design and focus only on the pieces they really care about.

The fact that many of those products fail, or are "whacky", misses the key point here: that the gongkai system, with its low barriers to entry, allows experimentation and improvement to be iterated so rapidly that bad ideas fall quickly by the wayside, to be replaced by better ones, until a winning combination is achieved. As patent thickets and copyright maximalism tie up Western companies in fruitless and debilitating legal battles, the shanzhai companies and their nimble gongkai culture may soon emerge as the true heirs of the innovative startups that created Silicon Valley and the Internet before intellectual monopolies started to throttle both.

Permalink | Comments | Email This Story
]]>not-necessarily-according-to-the-letter-of-the-lawhttps://www.techdirt.com/comment_rss.php?sid=20141230/09362929550Mon, 5 Jan 2015 09:11:00 PSTMPAA Wants Regulators To Force ISPs To Block Sites 'At The Border'Tim Cushinghttps://www.techdirt.com/articles/20150102/19563929582/mpaa-wants-regulators-to-force-isps-to-block-sites-border.shtml
https://www.techdirt.com/articles/20150102/19563929582/mpaa-wants-regulators-to-force-isps-to-block-sites-border.shtmlinglorious death, the MPAA's best shot at ISP-level site blocking died with it. But the MPAA is nothing if not stubborn and is still willing to wreak havoc on the internet in exchange for a slight dip in infringement.

According to a leaked document from the MPAA's law firm [pdf link] and two publicfilings in support of the International Trade Commission (sent over by Charles Duan of Public Knowledge), the movie industry is hoping to use the agency's new willingness to regulate digital transmissions like physical goods as a foundation for site blocking.

As we've discussed for years, the ITC has been an active player in helping US patent holders go after those they believe are infringing. Generally, this has taken the form of blocking imports of infringing physical goods -- that the ITC deems as infringing (using different rules than the US court system). This has often allowed patent holders two separate bites at the apple -- one in the courts, and one at the ITC. But a recent case saw the ITC shift its focus -- and its purview -- in response to some circuitous patent infringement. Russell Brandon at the Verge details the case that has led to the MPAA's next attempt at site blocking.

The heart of the case is a company called ClearCorrect, which 3D prints clear plastic braces custom-designed for each patient's teeth. Much of the technology involved in the process is already under patent, but ClearCorrect has gotten around those patents by farming out its intricate computer modeling to an office in Pakistan. That modeling violates a number of US patents — and if ClearCorrect were shipping back the resulting braces in a box, it would be a simple case: the goods would be contraband, to be stopped at the border. But instead, ClearCorrect is only transmitting digital models from Pakistan and printing out the braces in local offices in Texas. The only thing coming in from Pakistan is raw modeling data. So what's a trade commission to do?

In the sweeping and unprecedented decision below, the International Trade Commission found that its authority to regulate trade extends to pure "electronic transmission of digital data" untied to any physical medium. Generally, by statute, the Commission's jurisdiction is limited to oversight of "importation . . . of articles." However, the Commission expansively construed the term "articles" to potentially include anything "bought and sold in commerce," thereby leading to its conclusion that digital data was an article of importation.

The MPAA, which has entered comments in favor of the ITC's self-granted power expansion, wants to use the agency's power over digital imports to block websites at the ISP level. The leaked Jenner & Block memo confirms this. The MPAA's lawyers don't consider it a slam dunk but they are cautiously hopeful that the ITC's land grab will pay off.

As discussed in the 2012 ITC Memo, seeking a site-blocking order in the ITC would appear to offer a number of advantages over federal court litigation, at least at first blush. This now seems even more so given the ITC’s recent decision (albeit now on appeal) holding that electronic transmissions are “articles” within the meaning of Section 337 of the Tariff Act of 1930, 19 U.S.C. § 1337. As also discussed in the 2012 ITC Memo, however, such an action would still involve several difficult questions of first impression, making the prospect of success in that forum uncertain.

While the ITC's new aim -- stopping infringing digital files at the "border" -- would seem to be the ideal starting point, the memo points out that many technical limitations make this approach less than feasible. The "transit" ISPs -- those that "ship in" data from other countries -- can be handled more easily by other court orders than by ITC regulation. The ITC's purview only covers inbound traffic, and technical limitations make this a weaker approach. For one, the lack of information on incoming packets means the blocks would only affect IP addresses. If a "pirate site" shares an IP address with another site, the block won't work. And IP addresses could easily be shared to circumvent blocking at transit ISP level.

The memo also notes that the internet is designed to flow around obstructions. Applying blocks at the transit level would simply shift infringing loads to other pathways, nullifying the blocks altogether.

The law firm then addresses blocking outbound traffic to infringing sites at the ISP level. This would ignore the inbound traffic of "transit" ISPs and demand action be taken by US ISPs.

Even though site blocking by transit ISPs may be impractical in most (and likely all) cases, it may still be possible for the ITC to issue orders to the consumer-facing network access ISPs requiring them to cease and desist from providing their subscribers with access to the pirate site. To do so, however, the ITC would first have to find that the network access ISPs, by providing their subscribers with access to the pirate site, have themselves violated Section 337.

That's the sales pitch for ISP-level site blocking. It somewhat ignores the new powers of the ITC and instead relies on convincing the agency that access to "pirate sites" -- even as a "dumb pipe" -- is a violation of Section 337. Definitions will need to be stretched and ISPs that allow their customers to roam the web freely will need to be painted as contributors to infringing activity.

Because it is the transit ISPs and not the network access ISPs that actually carry the infringing data across the border, we would need to persuade the ITC that the network access ISPs’ conduct is also tantamount to “importation into the United States” of copyright-infringing articles... For this reason, we may be able to develop a case that the network access ISPs, by virtue of the integral role that they play in the process of accessing and delivering infringing content from the foreign site to the end user, should be treated as an importer for purposes of Section 337.

If that doesn't work, the next argument is to portray the ISPs as involved in the sale of counterfeit goods.

Even if we cannot persuade the ITC that network access ISPs are “importers” of the infringing articles, it can plausibly be argued that the network access ISPs are engaged in a post-importation “sale” of the infringing articles to their end-user subscribers, in violation of Section 337. See 19 U.S.C. §1337(a)(1)(B) (providing that “sale after importation into the United States” is an unlawful act). The difficult question presented here is whether an ISP, by providing network access in exchange for its subscribers’ payment, can be found to have engaged in the “sale” of the infringing articles as that term is used in Section 337.

The arguments don't get any less ridiculous. There's a pitch for ISPs to have participated in "unfair acts" by "forcing" (read: allowed customers to access sites the MPAA doesn't like) the motion picture industry to "compete" against infringing copies of its own works. There's even a small paragraph that pushes the notion of contributory infringement, although the law firm notes that this would be the longest shot of all. The likeliest approach appears to be the use of the ITC's power to obtain cease-and-desist orders against ISPs, forbidding them from allowing access to "pirate" sites.

Public Knowledge's brief [pdf link] in opposition to the ITC's pending power shift points out that even though the statute itself is old (Tariff Act of 1930), its authors directly contemplated the difference between physical and more ethereal goods -- and made it clear that the two shouldn't be treated identically.

Evidence from the early 1900s indicates that Congress and others would have cleanly distinguished importation and telecommunication, vesting authority over each in distinct agencies. Treating the Commission as having authority over telecommunications data, then, conflicts with this distinction. To the extent that the Commission’s interpretation of “digital data” as an imported article encompasses such telecommunications data, this Court should reject that erroneous interpretation of the Commission’s purview.

[...]

There is substantial evidence that, around 1930, data transmissions were generally understood to be distinct from articles of commerce and international trade. This understanding influenced Congress, as reflected in its creation of separate and distinct agencies to oversee trade and telecommunications.

The distinction was highlighted by the Supreme Court as early as 1887, in considering one specific type of telecommunications data, namely telegrams:

Other commerce deals only with persons, or with visible and tangible things. But the telegraph transports nothing visible and tangible; it carries only ideas, wishes, orders, and intelligence. Other commerce requires the constant attention and supervision of the carrier for the safety of the persons and property carried. The message of the telegraph passes at once beyond the control of the sender, and reaches the office to which it is sent instantaneously. It is plain, from these essentially different characteristics, that the regulations suitable for one of these kinds of commerce would be entirely inapplicable to the other.

The brief also points out that, while the ITC is correct in noting that internet transmissions couldn't possibly have been envisioned during the crafting of the 1930 Tariff Act, similar "articles" like telecommunications and radio signals had already been discussed by Congress, and each time, these were not allowed to fall under the same regulatory agency.

Putting the ITC in charge of digital transmissions will turn ISPs into ad hoc customs agents who need to inspect incoming packets and outgoing requests. Cloud services would also be negatively affected, as load balancing would need to be rebuilt from the ground up in order to accommodate the legal concerns now inherent in every transmission. The DMCA safe harbor would no longer exist, forcing ISPs to stay one step ahead of IP holders, building in anticipatory takedown response systems and choke points. The MPAA still wants site blocks and is still willing to break the internet to get them. Even the cautiousness displayed in the legal memo still glosses over the severe disruptions this use of the ITC's new powers will cause.

The good news? The ITC's "digital = physical" shift isn't in effect yet. The case prompting this shift is still under appeal and no decision is expected until late 2015. Chances are, this decision will be appealed as well, likely landing it in front of the Supreme Court sometime in the next few years. The MPAA can't move on its arguments until this is all decided. But it's ready to move as soon as it can, and this isn't its only plan of attack.

Permalink | Comments | Email This Story
]]>to stop pirates, sometimes you've got to break a few internetshttps://www.techdirt.com/comment_rss.php?sid=20150102/19563929582Wed, 31 Dec 2014 01:15:20 PSTWill Patents Ruin The Most Important Biotech Discovery In Recent Years?Glyn Moodyhttps://www.techdirt.com/articles/20141228/07054729529/will-patents-ruin-most-important-biotech-discovery-recent-years.shtml
https://www.techdirt.com/articles/20141228/07054729529/will-patents-ruin-most-important-biotech-discovery-recent-years.shtmlCRISPR gene editing technique may turn out to be one of the most important discoveries of recent years -- if patent battles don't ruin it. Technology Review describes it as:

an invention that may be the most important new genetic engineering technique since the beginning of the biotechnology age in the 1970s. The CRISPR system, dubbed a "search and replace function" for DNA, lets scientists easily disable genes or change their function by replacing DNA letters. During the last few months, scientists have shown that it's possible to use CRISPR to rid mice of muscular dystrophy, cure them of a rare liver disease, make human cells immune to HIV, and genetically modify monkeys.

Unfortunately, rivalry between scientists claiming the credit for key parts of CRISPR threatens to spill over into patent litigation:

[A researcher at the MIT-Harvard Broad Institute, Feng] Zhang cofounded Editas Medicine, and this week the startup announced that it had licensed his patent from the Broad Institute. But Editas doesn't have CRISPR sewn up. That's because [Jennifer] Doudna, a structural biologist at the University of California, Berkeley, was a cofounder of Editas, too. And since Zhang's patent came out, she's broken off with the company, and her intellectual property -- in the form of her own pending patent -- has been licensed to Intellia, a competing startup unveiled only last month. Making matters still more complicated, [another CRISPR researcher, Emmanuelle] Charpentier sold her own rights in the same patent application to CRISPR Therapeutics.

Things are moving quickly on the patent front, not least because the Broad Institute paid extra to speed up its application, conscious of the high stakes at play here:

Along with the patent came more than 1,000 pages of documents. According to Zhang, Doudna's predictions in her own earlier patent application that her discovery would work in humans was "mere conjecture" and that, instead, he was the first to show it, in a separate and "surprising" act of invention.

The patent documents have caused consternation. The scientific literature shows that several scientists managed to get CRISPR to work in human cells. In fact, its easy reproducibility in different organisms is the technology's most exciting hallmark. That would suggest that, in patent terms, it was "obvious" that CRISPR would work in human cells, and that Zhang's invention might not be worthy of its own patent.

Whether obvious or not, it looks like the patent granted may complicate turning the undoubtedly important CRISPR technique into products. That, in its turn, will mean delays for life-changing and even life-saving therapies: for example, CRISPR could potentially allow the defective gene that causes serious problems for those with cystic fibrosis to be edited to produce normal proteins, thus eliminating those problems.

Although supporters of patents will argue as usual that they are necessary to encourage the discovery of new treatments, CRISPR is another example where patents simply get in the way. The discoveries were made by scientists in the course of their work in fundamental science at academic institutions, not because they were employed by a company to come up with a new product. According to some, the basic application of CRISPR to human cells that everyone is fighting over may even be obvious. The possibility of legal action will doubtless discourage investment in companies working in this area, and thus slow down the flow of new treatments. As usual, the only ones who win here are the lawyers.

Permalink | Comments | Email This Story
]]>rhetorical-questionhttps://www.techdirt.com/comment_rss.php?sid=20141228/07054729529Mon, 29 Dec 2014 12:58:20 PSTIn The Spirit Of The Holidays: It's Not Too Late For Uber To Avoid Stupid Patent Of The MonthVera Ranierihttps://www.techdirt.com/articles/20141229/10283529539/spirit-holidays-its-not-too-late-uber-to-avoid-stupid-patent-month.shtml
https://www.techdirt.com/articles/20141229/10283529539/spirit-holidays-its-not-too-late-uber-to-avoid-stupid-patent-month.shtml"Good Spirit," he pursued, as down upon the ground he fell before it: "Your nature intercedes for me, and pities me. Assure me that I yet may change these shadows you have shown me, by an altered life!" – Charles Dickens, A Christmas Carol

As our devoted readers are aware, each month we highlight a Stupid Patent. This month, in the holiday spirit, we've decided to highlight a Stupid Patent Application. Our motivation for doing so is that we hope that our post, like Dickens' Ghost of Christmas Yet to Come, encourages a prospective patentee to change its stupid-patent-application-filing-ways. You see, we recently learned that Uber has filed for a patent on something so basic, so fundamental to our economic system, that it should be called out now before it becomes too late for both Uber and the public.

Here is some background: imagine you own a transportation company. You have a limited number of seats and you know that customers are willing to pay different amounts based on their sensitivity to cost. But you don't want seats to go empty, since every empty seat is a missed profit opportunity. So you implement a system where the more demand is up or supply is down, the more you charge. Or conversely, the more demand is down and supply is up, the less you charge. And then you file a patent application for your "invention."

Because Uber did just that, Uber is being forewarned of its risk of receiving the Stupid Patent of the Month award. Specifically, Uber has applied for a patent on a form of dynamic pricing, a practice that (even if it didn't exist before the study of economics) has been heavily in use by various industries, including most famously by airlines, for over 20 years.

1. A method for adjusting prices for services, the method being performed by one or more processors and comprising:

making a determination of an amount of requesters for a service at a given time;

making a determination of an amount of available service providers for providing the service at the given time;

adjusting a price, relative to a default price, for using the service provided by one or more service providers based, at least in part, on the determined amount of requesters and the determined amount of available service providers; and

transmitting pricing data corresponding to the adjusted price to one or more requesting devices or one or more provider devices so that the adjusted price can be displayed on at least one of the one or more requesting devices or the one or more provider devices and be indicative of an adjustment in price as compared to the default price.

Essentially, Uber claims to have invented the method of (a) checking how many people are requesting a service; (b) checking how many service providers are currently available; (c) adjusting the price based on these two factors; and (d) then showing the price to the person requesting it. Not only was such dynamic pricing almost surely known before 2012, this is a claim directed to an "abstract idea" of dynamic pricing based on supply and demand. The addition of the "transmitting" clause (i.e. "do it on a computer") shouldn't matter to patentability.

In filing its application, Uber acts as a good example of how our patent system has encouraged the filing of applications that should never be filed in the first place. The story here is not about a patent that has been granted, but rather that Uber thinks a patent can be granted. Applications like Uber's clog up the Patent Office, and oftentimes issue, despite clear flaws. Once issued, they can become fodder for trolls. Or in this case, they could be used to chill investment of time and resources in competitors.

We hope Uber's application never becomes eligible for the regular prize, because this is a stupid patent application that the Patent Office should quickly reject. We hope Uber realizes the harm patents such as this one cause to the innovation economy as a whole. It is not too late for Uber to change its ways and reject a system of Stupid Patents. We encourage Uber to join our fight against stupid patents before it suffers from "No rest, no peace. Incessant torture of remorse."

Permalink | Comments | Email This Story
]]>fix-things-nowhttps://www.techdirt.com/comment_rss.php?sid=20141229/10283529539Thu, 18 Dec 2014 14:44:00 PSTMyriad Loses Again: Patents On Genetic Testing Ruled InvalidGlyn Moodyhttps://www.techdirt.com/articles/20141218/06003529475/myriad-loses-again-patents-genetic-testing-ruled-invalid.shtml
https://www.techdirt.com/articles/20141218/06003529475/myriad-loses-again-patents-genetic-testing-ruled-invalid.shtmlstruck down patents that Myriad Genetics had obtained on naturally-occuring DNA sequences linked to breast cancer. As a result of that judgment, other companies started offering diagnostic tests based on the genes in question. Myriad claimed that despite losing patents on the DNA, its patents on tests based on that DNA were still valid, and took legal action to stop others from offering similar services. As we reported earlier this year, a federal district court judge refused to grant Myriad a preliminary injunction against one of those new entrants, and now the genetic testing patents have been ruled invalid, as Bloomberg reports:

Myriad Genetics Inc. (MYGN) can't block competitors' DNA tests to determine risk for breast and ovarian cancer after a U.S. appeals court said three patents on the tests never should have been issued.

The patents cover products of nature and ideas that aren't eligible for legal protection, the U.S. Court of Appeals for the Federal Circuit said in an opinion posted today on the court's docket. The court upheld a trial judge's decision to allow the competing tests, including those made by Ambry Genetics Corp., to remain on the market.

That's great news for women who can now choose freely from among a range of diagnostic options, often at prices substantially less than comparable testing offered by Myriad. It means that Myriad's monopoly on data derived from those tests has been broken: thanks to its patents, it has created the world's largest database of mutations in breast cancer genes. Most importantly, perhaps, it opens up the field of gene-based diagnostic testing to allow new entrants to experiment and innovate more freely. That, rather than granting monopolies to a few companies, is far more likely to lead to new medical breakthroughs, products and services.

Permalink | Comments | Email This Story
]]>now-go-forth-and-innovatehttps://www.techdirt.com/comment_rss.php?sid=20141218/06003529475Wed, 17 Dec 2014 11:59:31 PSTHave The Courts Done Enough To Stop Patent Trolling?Mike Masnickhttps://www.techdirt.com/articles/20141203/14090429318/have-courts-done-enough-to-stop-patent-trolling.shtml
https://www.techdirt.com/articles/20141203/14090429318/have-courts-done-enough-to-stop-patent-trolling.shtmlruling in July, has clearly put a serious crimp on the patent trolling business. Vague, broad, dangerous patents are falling like flies, new patent trolling lawsuits are on the decline and the US Patent Office is rejecting a lot more questionable software and business method patent applications. All good news. But is it enough?

There are some who are claiming that the courts have effectively "solved" the problem -- so no new legislation is needed. Of course, it seems interesting to me that these same individuals often appear to be those who insisted there never was a problem in the first place -- and who are also arguing that the courts have gone too far. Economist James Bessen -- who has done tremendous work in detailing the problems of patent trolls -- has an article in the Atlantic where he notes that, for all the positive advancements thanks to the Supreme Court, there's still much more to be done, as plenty of patent trolling lives on:

But don't shed too many tears for the patent trolls just yet. While these changes are a real positive step, they are also limited. While it's true that the Patent Office is granting several hundred fewer business method patents each month, it is still granting record numbers of software patents overall. Most of the litigation is over software patents, not business method patents: One study estimates that business method patents constitute only 10 percent of the patents used in lawsuits by “non-practicing entities” including patent trolls. And while the number of lawsuits has decreased, there are still over four times as many as in 1990, before the surge in software patenting began following court decisions in the mid-1990s. Furthermore, Matt Levy of the Computer and Communications Industry Association told me that in only one case has a victorious defendant recovered legal costs—thanks specifically to the April Supreme Court decisions.

It’s possible that the Supreme Court decisions will eventually have a greater impact on patent trolls than they have so far. For example, the Alice decision pertains to abstract software patents generally, not just to business method patents. It all depends on how the lower courts, particularly the Court of Appeals for the Federal Circuit, interpret and apply these decisions. But that is the very court which has allowed so many broad and vague software patents starting from the 1990s.

Indeed, the efforts by the Supreme Court have been helpful in moving things in the right direction, but so far it's only been a slight course shift, rather than really fixing the underlying problems of the patent system. Trolls are still able to get away with shaking down companies over questionable patents, because it's still ridiculously expensive to fight back -- even if there's a marginally better chance of recovering fees in truly egregious cases. Too many questionable patents are still getting through, and even if courts may finally be more willing to reject questionable "on a computer" patents, it's still a risky and expensive proposition to go to court.

Patent trolling is still a serious problem that many actual innovators face. The Supreme Court may have opened the door to fixing some of the very worst problems, but that doesn't mean all of the problems have gone away. In fact, nearly all of the problems are still there in some form.

Permalink | Comments | Email This Story
]]>not-yethttps://www.techdirt.com/comment_rss.php?sid=20141203/14090429318Tue, 16 Dec 2014 21:15:47 PSTCourt: Similarities In Shortening MLB Broadcasts Doesn't Equal Patent InfringementTimothy Geignerhttps://www.techdirt.com/articles/20141208/13202529361/court-similarities-shortening-mlb-broadcasts-doesnt-equal-patent-infringement.shtml
https://www.techdirt.com/articles/20141208/13202529361/court-similarities-shortening-mlb-broadcasts-doesnt-equal-patent-infringement.shtml
I've made this clear in the past, but I'm a huge fan of Major League Baseball's Advanced Media wing and a good deal of the work they do in providing clips and streaming on the internet and mobile devices. One aspect I hadn't been aware of, however, was a method for watching games very quickly by stripping out the downtime, commercials and the commentary. As I understand it, it's all the game content and nothing else, and it can make it possible to watch a full game in fifteen minutes.

And if this sounds like something baseball broadcasts have obviously needed, a company called Baseball Quick fully agrees with you. That's why it also developed a system for likewise condensing baseball games. Then, because this is America, Baseball Quick and MLB spent the last three years going after each other in court for the two competing products that do the exact same thing. And, amazingly, despite the existence of patents in the works, the judge in the case has rightly outlined why there isn't any infringement.

U.S. District Judge Katherine Forrest noted that each company's algorithm offers a different pitch, in a 23-page opinion issued Thursday. MLB "uses a subjective editing process focused on copying and pasting material, whereas BQ's is objective and focused on deleting material," the opinion states. She granted MLB's motion for a judgment declaring that its technology does not infringe its competitor's patent.

While it's not quite the idea/expression dichotomy one finds in copyright cases, it's nevertheless nice to see a court rule on the actual method ("art") rather than the outcome. Too often the focus is on the latter, which feeds into an ownership culture that appears to think that having an idea that is of use is the same as developing a patentable method for arriving at said use. In this case, the method for achieving shorter baseball broadcasts was different in a significant enough way that there's no infringement.

In the meantime, MLB is trying to get Baseball Quick's patent declared invalid under the idea that the method described is obvious. The move is likely MLB being vindictive, but that doesn't mean they aren't right. Shortening a broadcast of a baseball game by deleting all the parts that aren't the game does sound obvious, though the method for getting there may not be.

Permalink | Comments | Email This Story
]]>home-runhttps://www.techdirt.com/comment_rss.php?sid=20141208/13202529361Mon, 15 Dec 2014 15:45:05 PSTCourt Ruling: EA's Anti-Piracy Software Is Patent InfringingTimothy Geignerhttps://www.techdirt.com/articles/20141208/13124129360/court-ruling-eas-anti-piracy-software-is-patent-infringing.shtml
https://www.techdirt.com/articles/20141208/13124129360/court-ruling-eas-anti-piracy-software-is-patent-infringing.shtmlannoying to paying customers, as well as being so massively ineffective that games employing SecuROM later became amongst the most pirated video games of all time. But, results aside, EA would tell you that it needed to use DRM to protect the company from piracy. Even if SecuROM failed, the company had to at least try, or else the freeloaders that live the highlife getting around intellectual property laws would win. Violating IP laws is wrong, damn it, and EA was going to do everything in its power to right that wrong.

Uniloc Luxembourg S.A. sued in 2013, claiming EA's SecuROM video game activation system infringes on U.S. Patent No. 5,490,216. The system allows EA customers to activate and register their video games and is aimed at reducing piracy and "casual copying," Uniloc alleged. SecuROM restricts the number of devices a customer can simultaneously activate a game on with the same key. EA games that use the system include "Alice: Madness Returns," "Dragon Age II" and "Darkspore: Limited Edition," the complaint stated. Uniloc asked the court to for compensatory damages and "a reasonable, on-going, post judgment royalty." A federal jury agreed with Uniloc and awarded over $4.86 million in compensatory damages on Friday.

I have to admit, I feel a bit like the characters at the end of the original Jurassic Park movie, who were being attacked by velociraptors only to be saved at the last moment by the tyrannosaurus rex that had nearly murdered them all earlier. You don't really root for either side; you can only pray they tear each other apart. That said, schadenfreude is one of my failings, and enjoying it with the healthy dose of irony that comes along with EA infringing on a patent with its anti-piracy software is so good, it's likely fattening.

Following the recent one year anniversary of the House passage of the Innovation Act — a bill that would have stopped patent trolls from suing tech entrepreneurs but was ultimately blocked in the Senate — CEA highlights the top Twitter accounts covering the issue and the harm that patent trolls have on small businesses across the U.S.

1. @juliepsamuels

Previously with the Electronic Frontier Foundation and Executive Director of Engine Advocacy, Julie is arguably the top voice covering patent reform inside and outside the social media realm. Her blend of legal analysis and witty commentary breaks down the patent troll issue in a comprehensive, digestible form.

The Main Street Patent Coalition is a non-partisan group of organizations dedicated to clubbing patent trolls. With members ranging from the National Retail Federation to the American Gaming Association, their tweets highlight why common sense reform is critical to stopping patent abuse.

If trolls continue to shake down small businesses w/o consequences or costs, these scams will continue. We must #FixPatents.

CEA’s Innovation Movement is keeping the pressure on the Senate by reaching out to tech enthusiasts across the country to tell their Senators to take action – since trolls cost the U.S. economy $1.5 billion every week! NYC’s Nafees is a top advocate helping to tackle this issue.

Lee, Newegg’s Chief Legal Officer, vowed to never settle with a patent troll – and so far, he has a perfect record fighting them in court. Because getting the Senate to #FixPatents is something Lee is passionate about, he uses Twitter as tool to spread that message.

Patent Progress, off-shoot of the Computer and Communications Industry Association, advocates for smart laws regulating the digital economy. When not trying to save the U.S. economy from patent trolls, this Twitter account often features comics and videos finding humor in the legalized extortion that is patent trolling.

If you’re looking for insight about the Innovation Act in 140 characters, go straight to the source. Representative Bob Goodlatte, Chairman of the House Judiciary Committee, sponsored the Innovation Act and helped to lead its charge out of committee in 2013.

Todd founded the White Noise app and quickly learned what it means to fight a patent troll when his innovative product began to receive recognition. Patent trolls go after successful startups that are least able to defend themselves, and Todd has taken on a personal crusade to see their racket put to a stop.

Timothy has a knack for explaining complex issues affecting the tech community in a short, concise manner – so it should come as no surprise that he is now serving as the senior editor of Vox.com and uses Twitter to succinctly breakdown the issue of patent litigation reform.

A lot of businesses targeted by patent trolls are so small that the costs of mounting a defense can bankrupt them.

With members ranging from Intel to Lyft, the App Developers Alliance supports entrepreneurs by advocating for smart public policies. Their Twitter account is a great resource for all things tech policy, especially the importance of patent litigation reform.

Last, but certainly not least, Ars Technica’s Twitter account dedicated to covering the intersection of technology, law and policy features the latest articles from Joe Mullin, whom we dub “patent troll editor-in-chief.”

The Innovation Movement, sponsored by the Consumer Electronics Association, unites those who believe innovation is critical to American global leadership and economic growth. The Innovation Movement uses grassroots advocacy tools to support smart public policies, like patent litigation reform, that foster startups and innovation. To learn more about the Innovation Movement’s work fighting patent trolls, visit trollticker.com, follow on Twitter @imovement and like Innovation Movement on Facebook.

Techdirt has written about Newegg many times since the company became a leader in fighting back against ridiculous patent lawsuits, going toe-to-toe with some of the biggest trolls around. The company's Chief Legal Officer, Lee Cheng, has vowed to never settle with a patent troll, and so far has never lost an appeal on a patent claim. As he puts it:

As I learned about this uniquely American litigation industry, it became clear that the lawsuits were being filed by people who had identified a way to extract unjust premiums for often worthless patents because of weaknesses in our legal system. The majority of defendants, both large and small companies, are forced to settle with patent trolls because of the high costs of defending themselves.

Newegg has fought back and won — but, as satisfying as it is when a patent troll gets smacked down in court, this is still an unnecessary and unfair tax on innovation, draining time and resources from companies like Newegg that could be better spent doing just about anything other than fending off frivolous patent lawsuits. And for every company that fights back, there are many more that don't have those resources at all, and simply pay the extortionist fees that make patent trolls billions of dollars richer every year. No matter how many companies fight back, the problem won't truly be solved without real patent litigation reform that addresses the roots of trolling and abuse.

Last week marked the one year anniversary of the passage of the Innovation Act in the House, by a bipartisan majority. The bill, which would have made real progress in addressing the patent troll problem, was blocked in the Senate, but there is no good reason this bipartisan bill supported by the President should not be law. Today, the CEA urges you to contact your U.S. Senator and ask them to pass patent litigation reform using the contact tool at that link and embedded below.

The Innovation Movement, sponsored by the Consumer Electronics Association, unites those who believe innovation is critical to American global leadership and economic growth. The Innovation Movement uses grassroots advocacy tools to support smart public policies, like patent litigation reform, that foster startups and innovation. To learn more about the Innovation Movement’s work fighting patent trolls, visit trollticker.com, follow on Twitter @imovement and like Innovation Movement on Facebook.

Permalink | Comments | Email This Story
]]>we-need-reformhttps://www.techdirt.com/comment_rss.php?sid=20141205/12203329338Fri, 5 Dec 2014 19:39:00 PSTHow Should Standard-Essential Patents Be Licensed?Glyn Moodyhttps://www.techdirt.com/articles/20141204/03165229325/how-should-standard-essential-patents-be-licensed.shtml
https://www.techdirt.com/articles/20141204/03165229325/how-should-standard-essential-patents-be-licensed.shtml
Of course, that leaves open the rather important question of what exactly FRAND means in practice, and an interesting case before the Court of Justice of the European Union aims to obtain some guidance on this issue. The court itself has not yet handed down its judgment, but as usual, an Advocate General has offered his own thoughts as preliminary guidance (pdf). Here's the background to the case:

Huawei, a Chinese telecommunications company, holds a European patent regarded as 'essential' to the 'Long Term Evolution' (LTE) standard developed by the European Telecommunications Standards Institute (ETSI). The LTE standard relates to next generation -- that is to say, fourth generation -- mobile phone communications. Anyone complying with the standard inevitably uses the patent owned by Huawei, which is why that patent is categorised as 'essential'. Huawei is a member of ETSI and notified the patent to that institute. Huawei also made a commitment to ETSI to grant licences to third parties on fair, reasonable and non-discriminatory (FRAND) terms.

However, when another Chinese company, ZTE, sought a license from Huawei, they were unable to agree on the terms, so Huawei brought an action for infringement against ZTE. According to ZTE, Huawei's attempt to obtain an injunction against it constituted an abuse of its dominant position, since ZTE was willing to negotiate a license.
Here's the key part of the Advocate General's opinion. After making the alleged infringer aware of its infringement, the standard-essential patent-holder must also:

Present the alleged infringer with a written offer of a licence on FRAND terms and that offer must contain all the terms normally included in a licence in the sector in question, including the precise amount of the royalty and the way in which that amount is calculated.

The infringer must respond to that offer in a diligent and serious manner. If it does not accept the SEP holder’s offer, it must promptly present the latter with a reasonable counter-offer, in writing, in relation to the clauses with which it disagrees.

The rest of the opinion then goes on to fill out details of what is reasonable and unreasonable as the negotiations continue, and as recourse is made to the courts. In many ways, it's an attempt to flesh out what that problematic "fair, reasonable and non-discriminatory" means. But a far better solution would be to stipulate that all standard-essential patents must be licensed on an RF -- royalty-free, also known as requirement-free -- basis. That's precisely what the leading web standards body, the W3C, specifies in its patent policy:

In order to promote the widest adoption of Web standards, W3C seeks to issue Recommendations that can be implemented on a Royalty-Free (RF) basis. Subject to the conditions of this policy, W3C will not approve a Recommendation if it is aware that Essential Claims exist which are not available on Royalty-Free terms.

To this end, Working Group charters will include a reference to this policy and a requirement that specifications produced by the Working Group will be implementable on an RF basis, to the best ability of the Working Group and the Consortium.

It's quite reasonable to expect holders of standard-essential patents to agree to RF licensing since the inclusion of their invention in a standard is, in itself, an important benefit: it places the patent-holder at the center of the standard, and enhances its influence over the field it refers to. It also helps it avoid the need for costly and pointless lawsuits like the one between Huawei and ZTE.

If you'd like to read more awesome and interesting stuff, check out this unrelated (but not entirely random!) Techdirt post via StumbleUpon.

Permalink | Comments | Email This Story
]]>urls-we-dig-uphttps://www.techdirt.com/comment_rss.php?sid=20101006/03163111308Thu, 4 Dec 2014 14:44:20 PSTDefining The Patent TrollMike Masnickhttps://www.techdirt.com/articles/20141201/12034829287/defining-patent-troll.shtml
https://www.techdirt.com/articles/20141201/12034829287/defining-patent-troll.shtmlofficially define "patent troll" to a level that might satisfy a patent holder who insists that there is no such thing as a patent troll. For many years, we here at Techdirt avoided using the phrase "patent troll" because it did seem rather undefined, but it became so commonplace that we eventually gave in and used the phrase regularly. The term has showed up in all sorts of places, including courtrooms and discussions on legislation. In some circles, policy makers often use the term "non-practicing entities" (or NPEs) instead of "patent trolls" but that upsets some who feel that there are "NPEs" (like universities) that do research that they wish to license off, but which will never be "practicing entities." Some have also called them "Patent Assertion Entities" (PAEs) to describe companies who do nothing more than assert patents. At least that leaves out universities -- but then that also leaves out companies who do other things but who also, do some patent trolling (including, frankly, some universities, since we're discussing them).

Stephanie Kennedy, who runs the IP Troll Tracker blog, came up with the following definition:

Patent Troll, n -

1/ A company or individual who, using patents that either never should have been issued or are broadly constructed (intentionally for the purpose of misuse, or as a result of poor USPTO patent examination practices), sends letters to various and sundry companies and/or individuals that simultaneously request license fees and threaten legal action if the recipient fails to respond correctly by paying up and who will, in the face of inaction by a demand letter recipient, actually file suit in Federal District Court, the District of East Texas being the most popular venue.

2/ A company set up to act as a cover for large corporations who try to breathe new life into older patents which they would ordinarily let expire but, as a result of greed and/or pressure from Wall Street, have decided are ripe for assertion or litigation.

Anyway, I like this formulation a lot better than the simplistic "NPE" designation, because I think there are lots of "practicing entities" that do trollish behavior (Microsoft being a big one). The problem with patent trolling tends to be that it's little more than a classic shakedown. Trying to get companies to pay up because the cost of paying up is usually a lot less than the cost of going to court to explain why you shouldn't have to pay up.

There is, not surprisingly, a fascinating discussion in the comments to the IP Troll Tracker's definition. A lot of it is people quibbling with who's to blame here -- arguing that there may be problems with the Patent Office granting patents it shouldn't or with some form of "litigation abuse," but that patent trolls aren't the "problem." That's... questionable at best. While it may be true that patent trolls aren't doing anything "illegal," it doesn't take any special economic skills to recognize that what they are doing is a deadweight economic loss.

Anyone who's spent any time exploring the murky underworld of patent trolling knows what is mostly happening. Quite frequently it's lawyers -- often former patent attorneys -- who absolutely know they're abusing the system for profit and they don't care about it at all. They buy up a few patents that they know are just vague enough and then they just start sending out the settlement letters and wait for the cash to come in. This is not "promoting the progress." It is not advancing any innovation. It is purely about taking money away from those who actually innovate, and handing it over to trolls and their investors, not to reinvest in any sort of innovation, but to reinvest in trolling.

Permalink | Comments | Email This Story
]]>definitions-matterhttps://www.techdirt.com/comment_rss.php?sid=20141201/12034829287Mon, 1 Dec 2014 12:04:40 PSTOne Year Since The Innovation Act, And Still No Patent ReformCEAhttps://www.techdirt.com/articles/20141126/12052129261/one-year-since-innovation-act-still-no-patent-reform.shtml
https://www.techdirt.com/articles/20141126/12052129261/one-year-since-innovation-act-still-no-patent-reform.shtmlPost sponsored by

One year ago this week, the House overwhelmingly passed bipartisan patent reform legislation — the Innovation Act — to stop patent trolls from suing innovators, collecting billions, costing jobs and undermining economic growth. The Senate failed to act, but there’s no reason this bipartisan bill should not become law.

Much like a kid handing over his lunch money to a bully, patent trolls are extortionists who sue small companies for money. Patent trolls do not create jobs or products, but instead get rich by suing or threatening litigation to extract licensing fees from businesses and tech entrepreneurs.

In 2011 the founder of TMSOFT, Todd Moore became acquainted with patent trolls when Lodsys, a patent holding company aka patent troll, sued Moore over the "White Noise” mobile app he developed. The patent troll letter said Moore was in violation of 4 of their patents. Lodsys doesn’t even produce apps or anything for that matter.

Small business owners like Moore aren’t the only victims of patent trolls. Patent extortionist Lodsys went ahead and also sued Walt Disney Company over apps.

Big or small, no one is safe from patent trolls. UNLESS Congress takes action and changes our laws. Patent trolls bleed $80 billion a year from the U.S. economy, that’s 1.5 billion a week!

The House has taken action, now it is up to the Senate.

The Innovation Movement, sponsored by the Consumer Electronics Association, unites those who believe innovation is critical to American global leadership and economic growth. The Innovation Movement uses grassroots advocacy tools to support smart public policies, like patent litigation reform, that foster startups and innovation. To learn more about the Innovation Movement’s work fighting patent trolls, visit trollticker.com, follow on Twitter @imovement and like Innovation Movement on Facebook.